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by Vic Pascucci and Mary Shouse
As companies commit to net-zero goals by 2050 and earlier, governments build out legislation and provide funding to slash emissions, and areas of Wall Street turn their attention to sustainability-forward investing, methane has received a fair amount of attention recently. As we deep-dive into methane, let's first lay the groundwork and define methane’s relationship to the natural gas industry. Methane makes up 85-95%+ of natural gas that comes to your home. Methane is a molecule composed of one carbon and four hydrogens. Upon combustion, it releases energy, CO2, and water. For reference, about 117 lbs CO2 are produced per MMBtu of traditional natural gas combusted, compared to more than 200 lbs CO2 per MMBtu of coal and 160 lbs CO2 per MMBtu of distillate fuel oil. [1] We say traditional natural gas, because exciting innovations in green methane molecules, renewable natural gas, and circular energy are changing the landscape. Nonetheless, methane is a common greenhouse gas that is about 25x more potent at trapping heat than CO2 (it is 86x more potent than CO2 over 20 years, or, due to its ~12 year atmospheric lifespan, 28x over 100 years). It constitutes about 10% of total GHG anthropogenic (human-caused) emissions in the atmosphere. Other sources, such as wetlands, release methane naturally, which comprise 35-50% of global methane emissions. [2,3]
The United States is one of the largest methane emitters, primarily emitting from agricultural operations, landfills, coal production and transportation, oil systems, and natural gas systems (24%). [4] For comparison, globally, oil and gas combined contribute to just over 22% of anthropogenic methane emissions and 11% of total methane emissions. [5]
Methane Emissions from the Natural Gas Sector
Calculating emissions from the natural gas industry, specifically, can be complicated due to multiple methodologies, data sources, and divergent interests. Currently, the EPA estimates the methane leak rate associated with natural gas systems, as a percent of total methane retrieved from the ground, to be around 1.4%, or around 6.5 million metric tons (MMT) per year. * [4] However, some studies suggest this number may be underestimated by 25-60%, or emissions totaling up to 13MMT, based on alternative calculation models (see: here, here, and here). The system of methane emitters is extremely complex, obviously leading to variation in results and disagreement within the scientific community. Additionally, the discrepancy in the outcomes of these models highlights that methane emissions models are only as good as the data that feed them, and the data can improve. We need accurate, asset-level “real world” data. Given that data is scant, investing in new technologies that can cost effectively acquire “good enough” data (i.e. data that will lead to actionable insights to repair leaks and minimize fugitive emissions) is where we see the biggest investment opportunity. There is work to be done to minimize escaped methane–work that is ideal for start-ups and entrepreneurs who have a passion for ESG and who want to build game-changing companies that have meaningful impact. Regulation will soon catch up.
Regulation trends are encouraging as well, as the Biden Administration–and many governments around the world–begin to draft rules that aim to slash methane emissions. At COP26 last November, the US and EU pledged to cut methane emissions by 30% by 2030. Given methane’s short life in the atmosphere and its high heat trapping potential, this is one of the most powerful GHG reduction strategies in the fight against global warming in the short-medium term. More than 100 countries signed on, including 15 of the 30 highest methane-emitters. And now, the government is putting its money where its methane commitment is: Biden announced on January 31st it would avail $1.2B to states to clean and cap orphaned oil and gas wells. Federal funding for this type of activity will eventually total $4.7B.
Other updated methane emissions policies are in the pipeline, no pun intended. Several Federal Agencies are rolling out plans to crack down on methane emissions: DoT, DoE, DoA, and multiple interagency committees have begun pushing guidelines, research, and monitoring techniques. Additionally, the Gas Technology Institute (GTI) has launched an initiative to measure and verify companies’ methane emissions.
Regulation can either stifle innovation or it can enable it. As new regulation is passed, new technology will play an essential role in achieving compliance and reducing methane emissions. Mandatory methane reductions will cause companies to engage with multiple technology solutions for managing and reducing methane emissions across the supply chain. At some point, the market will standardize on a set of technology winners for methane detection, measurement, mitigation, and prevention.
Methane loss from natural gas systems arises from fugitive sources (think: valves, flanges, fittings, compressors, seals, etc.), venting, and flaring during routine and maintenance operations and upset events. The majority of methane emissions come from a relatively small number of large leaks, or super-emitters. These leaks occur across a vast network: over a million wells, hundreds of processing facilities, and well over a million miles of pipelines. Investing to reduce methane emissions is not new to the natural gas industry. When the Trump Administration rolled back methane regulations, many industry players continued to proactively invest in reducing their methane emissions voluntarily. According to the EPA, overall methane emissions from the natural gas industry have decreased 16% from 1990 to 2019, even though dry gas production has increased 91% over the same period. These reductions come primarily from reductions in emissions originating from distribution, transmission and storage, processing, and exploration. [4]
Emissions Reduction Solutions in the Natural Gas Industry
So how do we tackle methane emissions within the natural gas system? Different use cases in the industry will require different technologies. A solution that addresses leaks at fixed facilities, like compressor stations or production sites, may not economically address the miles and miles of pipelines that span the country. Based on our discussions and collaboration with many startups and established emission monitoring players, the table below breaks down at a high level what we are seeing from the innovative solutions companies and researchers addressing leak detection and repair (LDAR) (best case = full):
Of course, there is a fair amount of variation within each category. We can also look at some of these technologies and map their use cases, based on their advantages and disadvantages:
Source: Improving Characterization of Anthropogenic Methane Emissions in the United States, 2018
Different data acquisition modalities have different strengths and weaknesses, and we will likely need multiple sensing technologies depending on the use case, the risk (both in terms of quantity and likelihood) of methane loss in the atmosphere, and the geographic coverage needed.
The natural gas system is a massive, complex trillion-dollar-plus infrastructure, and hugely important to powering America and modern lifestyle in advanced economies. And now, new technology will enable it to pursue paths toward methane emissions reductions that have never been feasible before. The regulations are in play, the tech is coming together. The stage is set, and upcoming federal/global regulation is shining a spotlight on methane emissions. The industry is ready to act. We look forward to working with the startups innovating in this space and to (hopefully!) partner with the ones that will become the defining champions of the future of natural gas.
*EPA estimates are derived using methodologies consistent with the 2006 IPCC Guidelines for National Greenhouse Gas Inventories4
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